IREF - Institut de Recherches Économiques et Fiscales
Pour la liberté économique et la concurrence fiscale
One problem with this blame-game is that last year’s recession was much deeper in many European and Asian countries than it was in the United States.
By the fourth quarter of 2008, as the nearby table shows, real US gross domestic product was just 0.8 percent smaller than it had been a year earlier. The contraction was twice as deep in Germany and Britain and much worse in Japan and Sweden.
In February, US industrial production was 11.8 percent lower than a year before — while Singapore was down by 22.4 percent, Sweden by 22.9 percent and Japan by 38.4 percent.
What was the mechanism by which US problems were supposedly spread to other countries ? It wasn’t international trade. The dollar value of US imports didn’t start to fall until August 2008, and imports of consumer goods didn’t fall until September — many months after Japan and Europe fell into recession.
Indeed, most of the economies that fell first and fastest were not heavily dependent on exports to the United States. Even Japan accounted for just 6.6 percent of US merchandise imports last year, compared with 15.9 percent for both Canada and China — whose economies fared relatively well.
Even if all of the weakest European and Asian economies could plausibly blame all their troubles on the relatively stronger US economy, how could anyone possibly blame banks ? There were no bank failures last year in Japan, Sweden, Canada or any other country on this list except Britain. And US and British banks didn’t fail until September-October — at least nine months after the Japanese and European recessions began.
Yet it’s clearly US/UK banks being fingered as the villains. German Finance Minister Peer Steinbrueck, for example, criticized an "Anglo-Saxon" attitude in America and Britain that encouraged risky lending and investment practices because of "an exaggerated fixation on returns."
But Germany’s GDP and industrial production was down 19.2 percent for the year ending in January — versus an 11.4 percent decline in Britain and a similar US drop. Are we supposed to believe that German (and Japanese) firms are more dependent on US and UK banks than American and British firms ?
Another problem with blaming the United States is that the timing is all wrong. If the US recession had simply spread to other countries like a mysterious infection, shouldn’t the US economy have been the first to start contracting ?